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China's Fiscal System: A Work in Progress (2005)

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We argue in this paper that unless China begins to tackle more systematically the serious problems that have emerged in the finances of its various levels of sub-national government the problems to which the present unsatisfactory system give rise will over time increasingly distort resource allocation, increase distributional tensions, and slow down the impressive recent growth of the Chinese economy. Despite the lack of solid and reliable information on the size and nature of China’s real fiscal system, we show that the evidence available is generally consistent with this pessimistic reading. China’s fiscal and – in time – economic future thus rests to some extent on reforms to key aspects of its fiscal system, especially its intergovernmental finances. Moreover, a more consistent and purposive framework to this complex of problems seems needed. Given the scale and scope of China’s underlying public finance problems, the ‘reactive gradualism’ evidenced in recent ad hoc reforms to this or that piece of the fiscal system has, we suggest, run its course.

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  • Richard Bird & Christine C.P.Wong, 2005. "China's Fiscal System: A Work in Progress (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0520, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper0520
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    File URL: http://icepp.gsu.edu/files/2017/09/ispwp-0520.pdf
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    1. International Monetary Fund, 2004. "Toward More Effective Redistribution: Reform Options for Intergovernmental Transfers in China," IMF Working Papers 2004/098, International Monetary Fund.
    2. Zhihua Zhang & Jorge Martinez-Vazquez, 2003. "The System of Equalization Transfers in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0312, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Zhou, Huizhong, 2000. "Fiscal decentralization and the development of the tobacco industry in China," China Economic Review, Elsevier, vol. 11(2), pages 114-133, December.
    4. Bubnova, N. & Way, L., 1998. "Trends in Financing Regional Expenditures in Transition Economies. The Case of Ukraine," World Bank - Discussion Papers 378, World Bank.
    5. Roy Bahl & Jorge Martinez-Vazquez, 2003. "Fiscal Federalism and Economic Reform in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0313, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Mr. Raju J Singh & Mr. Ben Lockwood & Mr. Ehtisham Ahmad, 2004. "Taxation Reforms and Changes in Revenue Assignments in China," IMF Working Papers 2004/125, International Monetary Fund.
    7. Richard Bird & Joosung Jun, 2005. "Earmarking in Theory and Korean Practice (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0515, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Wong, Christine P. W. (ed.), 1997. "Financing Local Government in the People's Republic of China," OUP Catalogue, Oxford University Press, number 9780195900279.
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    Cited by:

    1. Raül Santaeulàlia-Llopis & Yu Zheng, 2018. "The Price of Growth: Consumption Insurance in China 1989–2009," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(4), pages 1-35, October.
    2. Petra Persson & Ekaterina Zhuravskaya, 2016. "The Limits of Career Concerns in Federalism: Evidence from China," Journal of the European Economic Association, European Economic Association, vol. 14(2), pages 338-374.
    3. Das-Gupta, Arindam, 2014. "Fiscal Resources for Inclusive Growth," ADB Economics Working Paper Series 416, Asian Development Bank.
    4. Li, Lixing, 2011. "The incentive role of creating "cities" in China," China Economic Review, Elsevier, vol. 22(1), pages 172-181, March.

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    Keywords

    Chima. Sun-national government; Fiscal system; China's fiscal system;
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